PRCL board served show cause notice over CEO appointment, Rs355m pay package: report

The Securities and Exchange Commission of Pakistan (SECP) has issued a show cause notice to Pakistan Reinsurance Company Limited (PRCL), its board of directors, and former chief executive officer for alleged irregularities in the CEO’s appointment, qualifications, and remuneration package, The News reported.

According to the SECP’s Adjudication Department, PRCL’s board violated provisions of the Companies Act, 2017, the Insurance Ordinance, 2000, and the Public Sector Companies (Corporate Governance) Rules, 2013, by appointing the CEO without government concurrence and approving benefits exceeding the sanctioned package. The Commission noted that the CEO received Rs355 million in 32 months—well above the compensation approved by the federal government.

The board appointed him as acting CEO on September 27, 2021, without following the “fit and proper” criteria, despite his having only about three years of relevant experience instead of the required five. Although the government later confirmed his appointment in August 2022 under the SPPS-III pay scale with a salary of Rs500,000 per month, the board approved several additional allowances and bonuses at its 169th meeting the next day.

These included ten fixed annual bonuses equal to one month’s salary each, a performance bonus, severance pay of four gross salaries per year of service, gratuity equivalent to two months’ pay per year, and yearly increments of Rs249,500. Other perks included official housing, vehicle and fuel, paid club memberships, children’s education reimbursement, home furnishing, and medical coverage.

The SECP observed that these benefits were “clearly over and above” those authorised under the SPPS-III scale and in violation of Section 188(2) of the Companies Act, which reserves CEO pay approvals for the federal government. It also found that the CV submitted to the Commission falsely claimed five years of key officer experience, later contradicted by two board members who confirmed only three years.

The regulator has asked six PRCL board members to explain within 14 days why penal action should not be taken. Penalties under the cited provisions include fines up to Rs5 million, daily fines for ongoing violations, and disqualification from serving as a director or CEO for up to five years.

PRCL, incorporated in 2000 and majority-owned by the Ministry of Commerce, is the country’s only state-run reinsurance firm and is listed on the Pakistan Stock Exchange.